AEI Hosts Fifth Secret Meeting to Promote Carbon Tax

On July 11, the American Enterprise Institute (AEI), a prominent conservative think tank, hosted a secret, four-and-a-half hour meeting of pols, wonks, and activists, including several self-identified ’progressives,’ to develop a PR/legislative strategy to promote and enact a carbon tax. This was the fifth such meeting to advance the ”Price Carbon Campaign/Lame Duck Initiative: A Carbon Pollution Tax in Fiscal and Tax Reform.” An annoted copy of the meeting agenda appears at the bottom of this post.

Perhaps not coincidentally, earlier this week former GOP Congressman Bob Inglis of South Carolina launched the Energy and Enterprise Initiative, an organization promoting carbon taxes. Inglis obtained funding for the project from the Rockefeller Family Fund and the Energy Foundation, both left-leaning foundations.

Left-right coalitions can be principled and desirable. For example, I worked with environmental groups to help end the ethanol tax credit, and I work with them now to develop the case for eliminating the ethanol mandate. We collaborate because we share the same policy objective, even if not always for the same reasons. The free marketers want to end political meddling in the motor fuel market and the environmentalists want to end federal support for a fuel they regard as more polluting than gasoline. The common objective is consistent with each partner’s core principles.

But such cases are the exception rather than the rule. In general, when left and right join forces, the appropriate question is: Who is duping whom?

My colleague Myron Ebell sent out an alert about the AEI-hosted carbon tax cabal earlier today. It appears immediately below:

From 1:30 until 5 PM today, the American Enterprise Institute is hosting a hitherto secret meeting to discuss how to enact a carbon tax in a lame duck session this fall or perhaps in the 113th Congress. I have pasted the agenda below and an article from today’s Greenwire. Note that this is the fifth meeting that they have held. Also note that the comments made about the meeting in the Greenwirearticle (just economists brainstorming) bears no relation to the agenda, which is clearly about plotting political strategy to enact a carbon tax.

As my colleague Marlo Lewis noted, we defeated capntrade by convincing the American public that it was really capntax. Twenty-odd House Democrats who voted for Waxman-Markey lost their seats. The Democratic Senate refused to take it up. It’s political poison, so naturally the more brain-dead parts of the Republican and big business establishment have decided how clever it would be to resurrect the carbon tax and push it as an alternative to regulation. I don’t notice anything in the AEI agenda about repealing the greenhouse gas emissions standards as part of the deal. Why don’t we do that first? Then we can talk about alternative policies if any.

Also note the idea that a deal could be done so that a carbon tax would be offset by reductions in other taxes and would therefore be revenue neutral. There are multiple problems with the idea of revenue neutrality. First, it never works. A new tax will quickly be raised. Second, the poorer people are, the higher the percentage of their income that goes for energy. Poor people already don’t pay much or any income tax. So a consumption tax offset by, for example, cuts in the corporate income tax rate, will be highly regressive. Third, the only way a carbon tax will reduce fossil fuel consumption is if it’s set quite high. And the only way a carbon tax will raise much revenue is if it’s set quite high. Thus they must be advocating European levels of taxation. Say $5 dollars a gallon of gasoline. Roughly $500 per ton of coal.

We must kill this incredibly harmful idea as quickly as possible. We can start by letting our contacts at AEI know what we think of their plotting to foist a carbon tax on America.

This is troubling because the dumb party has an uncanny ability to snatch defeat from the jaws of victory. Stopping Obama’s war on affordable energy is a key GOP campaign theme in 2012, and the base is upset because the Supreme Court just upheld the Obamacare individual mandate as a tax. Yet some GOP influentials now call for an open, unvarnished tax on affordable energy.

The GOP’s only clear product differentiator – and most durable political asset — is its reputation as the no tax increase party. The Inglis and AEI initiatives, if successful, would destroy this asset.

Inglis, by the way, proposed a carbon tax bill in the last Congress. He was roundly defeated in the primary by a Tea Party candidate, now-Rep. Trey Gowdy (R-S.C.). At least in 2010 Inglis could claim that he was offering a less mischievous alternative to cap-and-trade. But cap-and-trade is dead. There is no longer a prudential case to be made for carbon taxes as the lesser evil.

Some proponents claim that a carbon tax can be structured to be revenue neutral. For example, revenues from the carbon tax could be used to lower Social Security (FICA) taxes. So why not tax ‘bads’ like greenhouse gas emissions rather than ‘goods’ like labor? This clever rhetoric glosses over serious risks and downsides.

As mentioned in Myron’s alert, a carbon tax is an energy tax and energy taxes are regressive.

In a genuinely free society, taxes are used solely for revenue collection to fund essential (limited) government services. That is, taxes are not used to control behavior, reward friends and punish enemies, or pick winners and losers in the marketplace. While all taxes affect behavior and industrial competitiveness, carbon taxes deliberately aim to do so. Consequently, the extent of the tax will be determined not only by fiscal considerations but also by ideological judgments about which industries should win and lose, and by sky’s-the-limit speculation about the ‘social cost of carbon.’

Finally, revenue neutrality is a pipe dream, not only because of the way Washington works, but also because many proponents want a carbon tax precisely to increase federal revenue. For example, digital analysis traces the AEI meeting agenda to James Handley, a principal at CarbonTax.Org. Although the Web site talks about ‘softening’ the impacts by distributing revenues to households as carbon ‘dividends’ and about ‘reducing other taxes,’ a key selling point is “generate revenue to help close our looming budget gaps.”

2:45 – Economists and deficit hawksDiscussants: Autumn Hannah [Senior Program Director, Taxpayers for Common Sense], Aparna Mathur [resident scholar, AEI], Diane Lim Rogers [chief economist, Concord Coalition], Rob Shapiro [ex- U.S. Under Secretary of Commerce for Economic Affairs under President Bill Clinton, currently Senior Policy Scholar at the Georgetown University School of Business, Senior Fellow of the Progressive Policy Institute, advisor to the International Monetary Fund, director of the Globalization Center at NDN, chairman of the U.S. Climate Task Force, co-chair of America Task Force Argentina]